US economy expanded at 2.4 percent in 4th quarter

US economy logged a growth rate of 2.4 percent annually last quarter. (Reuters)

SummaryThe US economy slowed in part because consumers didn't spend as much as estimated.

The US economy logged a growth rate of 2.4 percent annually last quarter, sharply less than first thought, in part because consumers didn't spend as much as initially estimated.

Severe winter weather is expected to further slow the economy in the current quarter. But as temperatures warm, most economists think growth will rebound beginning in the spring.

The Commerce Department on Friday reduced its estimate of economic growth in the October-December quarter from an initial 3.2 percent annual rate. The revised estimate of 2.4 percent annual growth is the weakest quarterly showing since the first quarter of 2013.

A key reason for the downgrade was that consumer spending is now estimated to have expanded at a 2.6 percent annual rate, below the initial estimate of 3.3 percent though still the strongest quarterly spending by consumers in nearly two years.

Economists said the more sluggish pace of consumer spending resulted from bad weather at the end of the year, which cut into vehicle sales, among other purchases. But they pointed to one key point of encouragement in the report: The government's estimate of business investment was revised up to an annual rate of 7.3 percent - the best quarterly showing in a year and sharply higher than the initial 3.8 percent annual rate.

Jennifer Lee, senior economist at BMO Capital Markets, said that while she expects bad weather to limit this quarter's growth to a tepid annual rate of around 1.7 percent, she's looking for a solid rebound for the rest of the year.

''Due to Mother Nature, quarter one is not going to be anything worth writing home about,'' Lee wrote in a research note. ''The rebound ... and all of that pent-up demand won't show up until the second quarter.''

For all of 2013, the economy grew at a lackluster 1.9 percent. Analysts think growth will rebound in 2014, possibly to as high as a 3 percent increase in the gross domestic product, the economy's total output of goods and services.

Growth was held back last year by higher federal taxes and government spending cuts enacted to combat soaring budget deficits. Economists estimate that the squeeze from the government subtracted about 1.5 percentage points from growth last year. If growth does reach 3 percent this year, it would be the strongest performance since the recession ended almost five years ago.